GE 2014 Annual Report Download - page 143

GE 2014 FORM 10-K 123
GLOSSARY
Securitization A process whereby loans or other receivables are packaged, underwritten and sold to investors. In a typical
transaction, assets are sold to a special purpose entity, which purchases the assets with cash raised through issuance of
beneficial interests (usually debt instruments) to third-party investors. Whether or not credit risk associated with the securitized
assets is retained by the seller depends on the structure of the securitization. See “Monetization” and “Variable interest entity.”
Subprime For purposes of Consumer-related discussion, subprime includes consumer finance products like mortgage, auto,
cards, sales finance and personal loans to U.S. and global borrowers whose credit score implies a higher probability of default
based upon GECC's proprietary scoring models and definitions, which add various qualitative and quantitative factors to a
base credit score such as a FICO score or global bureau score. Although FICO and global bureau credit scores are a widely
accepted rating of individual consumer creditworthiness, the internally modeled scores are more reflective of the behavior and
default risks in the portfolio compared with stand-alone generic bureau scores.
Variable interest entity An entity that must be consolidated by its primary beneficiary, the party that holds a controlling
financial interest. A variable interest entity has one or both of the following characteristics: (1) its equity at risk is not sufficient
to permit the entity to finance its activities without additional subordinated financial support from other parties, or (2) as a
group, the equity investors lack one or more of the following characteristics: (a) the power to direct the activities that most
significantly affect the economic performance of the entity, (b) obligation to absorb expected losses, or (c) right to receive
expected residual returns.